Lewis Corey

The Decline of American Capitalism

The American Crisis


AMERICAN life moves and changes swiftly. Government and industry resort to new and desperate measures. Traditions break down. Accepted truths are challenged or repudiated. The present is dark, the future uncertain and threatening. There is an accumulating pressure of underlying ferments and forces which create social explosions. Classes mobilize: ideas clash. These are all indications of a crisis.

One aspect of the American crisis arose out of the depression and the efforts to overcome it. While ballyhoo promises a new and everlasting prosperity, a new world, millions hope merely for a job, any sort of job; for an income, any sort of income to ward off charity. Millions must accept charity, whether direct or in the form of “relief work.” The mobilization of government to “war upon depression” aroused hopes which were meagrely realized.

Another and more fundamental aspect of the crisis involves the decline of American capitalism. It is a crisis of the economic order itself. This is evident in the inability to restore prosperity on any substantial scale. The future is one of incomplete recovery: of economic decline, mass disemployment (including millions in clerical and professional occupations), lower standards of living, and war. Every depression is in a sense a crisis of capitalism. But this depression represents the development of a fundamental, permanent crisis in the economic and social relations of American capitalism. Only a deep-going crisis could force government and industry to adopt measures which were formerly condemned as opposed to economic progress. The intervention of government in industry is, of course, nothing new: the development of capitalism has been accompanied by growing government aid to industry. But such aid was limited in scope. It was, economically, an expression of the upswing of capitalism, of the necessity of government action to “regulate” the developing relations of trustified capitalism. But to-day government intervention is on an unprecedented scale. Its economics and politics are an expression of the decline of capitalism, of the necessity of government action to prop up the sagging foundations of the economic order. The avowed aim is to insure prosperity, formerly achieved by the working of “free” capitalist enterprise. The real need is for increasing use of government to manipulate economic forces, for state capitalism, because capitalist industry is unable to function as of old. The forms of state capitalism may change, but the need remains, with fascism looming ahead. As capitalism declines, the state must intervene more drastically to aid industry and suppress labor. It is the death of the old world, not the birth of the new.

The depression which set in after 1929 was the worst economic disaster in American history. It was aggravated by the acute world crisis, a major catastrophe of capitalism. The downward movement of production began in July, 1929 and continued until March, 1933 – three years and nine months. No previous decline was as long or as steep, not even in the great depressions of 1873 and 1893. In the depression of 1920-22 the downward movement of production continued ten months, and two years completed the swing from recession to renewed prosperity. Unemployment, including clerical and professional workers, rose in 1933 to 17,250,000; 14,250,000 wage-workers or nearly 50% were unemployed, compared with 30% in 1921. Part-time employment was also greater. And the situation was not very much improved, for the depression did not end in March, 1933. The revival, largely because of its inflationary and speculative character, did not lead to recovery. There was the ominous spectacle of a minor but complete cycle within a few months: revival in April, recovery in May, and “boom” prosperity in June; as production and profits outstripped wages and consumption, “prosperity” broke down in July, accompanied by a crash in the stock market; recession and depression again, and an intensification of the crisis.

These recurrent breakdowns of prosperity are a typical, damnable spectacle of capitalist civilization. Men, women, and children starve or agonizingly approach starvation while wheat and corn rot, vegetables perish, milk and coffee are destroyed. The wheels of industry slow down while millions of workers eager to work are condemned to unemployment. Wants go unsatisfied on an enormous and oppressive scale, although all the means exist to satisfy the wants. (Depression magnifies the condition prevailing even in periods of the most flourishing prosperity, when there are also millions unemployed; their wants and many wants even of employed workers are unsatisfied.) This monstrous state of affairs was unknown to the people of precapitalist civilizations: they knew want as the result of scarcity, natural calamity, or war, and the torment of labor lay in its severity. Capitalist civilization introduced a new form of want, want in the midst of abundance; a new torment of labor, the torment of workers deprived of work while there is an abundance of the means and objectives of working. Our ancestors would have considered the situation idiotic; it is considered idiotic to-day by the non-capitalist, developing socialist civilization of the Soviet Union.

After every depression the cry has gone up, “It can never happen again!” But it did happen again, and will. The United States experienced, from 1790 to 1925, one year of depression for every one and one-half years of prosperity. [1] Cyclical crises and breakdowns are inherent in capitalist production: depression is as characteristic as prosperity and nearly as frequent.

But this depression is more than the usual cyclical breakdown. Its duration, severity, and specific character are determined by non-cyclical factors of economic decline. It is not simply that another depression is inevitable after another short period of prosperity – although that in itself is enough to condemn capitalism, which must repeat the calamities of economic breakdown, mass unemployment, and mass starvation. Capitalism has survived many depressions: they have, in fact, been the starting points of new upswings of prosperity. This crisis of American capitalism involves two new developments of major historical importance:

In previous depressions economic forces were always strong enough to start and complete a recovery, but recovery now seems almost indefinitely postponed. Government intervenes to hasten the recovery, which is nursed and coddled and kept alive with all sorts of stimulants, government financial aid, and jabs of the inflation needle – an ominous contrast to the lusty capitalism of old!

Unlike former experience, this depression cannot end in any real upswing of prosperity, because cyclical recovery and prosperity are now necessarily limited by the pressure of capitalist decline, which involves exhaustion of the long-time factors of economic expansion. These are the critical developments which underlay the adoption of the National Industrial Recovery Act, of state capitalism. The captains of industry and finance, some say, have proven their incapacity: let the government act! But the incapacity is an old story: in the past it did not prevent the revival of prosperity, because capitalism was on the upswing, a progressive economic force. If the government must act now, must hand-feed industry, it is because capitalism is in crisis as a result of decline and decay, of the exhaustion of its progressive economic force.


1. Willard L. Thorp and Wesley C. Mitchell, Business Annals (1927), p.65.


Last updated on 30.8.2007